The overhead application rate is lower when an activity- based- costing approach is used than when a traditional approach is used because:
A) more costs are directly traced
B) costs are spread over more value- chain activities
C) nonvalue- added costs are eliminated
D) less costs are incurred

Question

Quizplus · Accepted Answer

Activity-based costing (ABC) traces more costs directly to products or services, reducing the amount of overhead that needs to be allocated, thus lowering the overhead application rate compared to traditional costing methods.

The Overhead Application Rate Is Lower When an Activity- Based-